HBF survey finds nine in 10 SMEs think Building Safety Levy will make more sites unviable

Small and medium-sized housebuilders across England are concerned that the imminent introduction of the Building Safety Levy will make developments financially unviable, according to a survey.

The levy, which will come into operation on 1 October, is a tax on new residential buildings which is meant to help pay for remediation of defective buildings identified across England in the wake of the Grenfell Tower tragedy.

However, it has become a lightning rod for criticism within the development sector, with housebuilders complaining that the burden of tax and regulation is already hampering viability.

Research carried out by the Home Builders Federation (HBF) and Quantum Development Finance revealed widespread concern among small and medium-sized (SME) housebuilders in the sector

The Q3 2026 survey, which received 114 responses from SME builders operating across England and Wales, found that 91% believed the levy would make developments financially unviable, while 36% said they had already delayed, redesigned, or cancelled schemes in anticipation of its introduction.

More than two-thirds (69%) said it would make them less likely to invest in new development opportunities, with a higher rate of 86.7% responding this way in London.

Unlike larger developers, SME builders will be required to pay the levy when the first home on site is complete, putting pressure on cash flow.

According to the HBF, the levy is only the latest addition to a stream of new regulations and taxes that have over the past five years increased the cost of building a typical new home by around £76,000.

“The ongoing layering on of costs onto development by successive Governments has made a growing proportion of potential house building sites unviable,” said Neil Jefferon, chief executive of the HBF.

“The new levy, compounded by other rising costs, tighter margins and challenging market conditions, will make even more developments unviable. SME developers in particular are being forced to rethink investment decisions, delay sites and reduce output as costs continue to increase.

“The home building industry is already making a substantial contribution towards the cost of remediating historic building safety issues, yet this levy places a further burden on developers who played no part in creating those problems.  

“We are urging the Government to pause the introduction of the levy and assess whether it is still necessary, particularly given the significant unallocated funding that already exists.”